Grant Accruals for NGOs: How to Record Costs Incurred but Not Yet Paid

Grant reports can be misleading when organizations record only what has already been paid. Accruals help show costs that have been incurred but not yet settled, giving managers and donors a more realistic view of the project’s financial position.

What is a grant accrual?

An accrual is a cost that relates to the current reporting period even though the invoice or payment may occur later. Examples include consultancy work completed before month-end, utility costs already consumed, staff benefits earned or goods received but not yet paid.

Why accruals matter

If an NGO reports only paid transactions, a project may appear underspent even though it has already incurred significant obligations. Accruals help management forecast more accurately and reduce sudden spending surprises in the next period.

Use evidence, not estimates without support

An accrual should have a reasonable basis. That could be a signed contract, delivery confirmation, approved timesheet, supplier statement or calculation based on a known rate. Avoid creating large unsupported accruals simply to make the budget look fully utilized.

Reverse and settle correctly

When the invoice is received or payment is made, the original accrual should be reversed or cleared so the cost is not counted twice. Finance teams should reconcile outstanding accruals each month and investigate items that remain open for too long.

Distinguish accruals from commitments

A commitment is an obligation that has been approved but may not yet have been incurred, such as a future purchase order. An accrual relates to goods or services already received. Both matter for forecasting, but they should not be confused.

For broader forecasting, see grant forecast vs budget.

Example month-end checklist

• Review unpaid supplier invoices.
• Check contracts for completed work.
• Confirm goods received before period-end.
• Estimate staff-related liabilities where appropriate.
• Record supported accruals.
• Review previous accruals for reversal or settlement.
• Compare the revised position with the grant budget.

Example

A consultant completes work worth USD 4,000 on 28 June, but the invoice arrives on 5 July. If June is the reporting cut-off, the organization may need to accrue the cost so the report reflects work already received. The exact treatment should follow the organization’s accounting policy and donor rules.

What to do next

Use the Grant Budget Sanity Checker to review whether your cost assumptions, commitments and forecast remain realistic.

For grant drafting and structured documents, GrantsWriterAI can help prepare working drafts for review.

For practical grant opportunities and funding intelligence, subscribe to Africads Grant News.

Use a consistent accrual threshold

Organizations do not need to accrue every tiny expense. A written materiality threshold can help finance teams focus on costs that would meaningfully affect the financial report. The threshold should fit the organization’s accounting policy and any donor-specific requirements.

Review accruals with program staff

Finance may not know that a consultant completed work, a training took place or goods were delivered if the invoice has not arrived. A short month-end check with program and procurement staff can identify incurred costs that would otherwise be missed.

Keep a schedule of open accruals showing the supplier or cost type, estimated amount, basis, reporting period and expected settlement date. This makes it easier to clear them correctly and prevents the same estimate from rolling forward indefinitely.

Accruals should also be reviewed during grant closeout. Any open item needs a clear explanation: will it still be paid, has the invoice been received, or should the accrual be reversed? Closing a grant with stale estimates can distort final expenditure and create differences between the final report and later accounting records.

Use the same accrual policy across grants unless a donor requires something different. Consistency makes reporting easier to explain and helps reviewers compare periods without wondering whether the organization changed its accounting treatment simply to influence the reported burn rate.

Frequently asked questions

What is a grant accrual?

It is a cost that has been incurred during the reporting period but has not yet been paid or fully invoiced by the time the accounts are prepared.

Why do accruals matter in grant reporting?

Without them, expenditure can look artificially low and management may underestimate the true cost of activities already delivered.

What evidence should support an accrual?

Use contracts, purchase orders, delivery evidence, payroll records, timesheets, supplier confirmation, or another reasonable basis showing the obligation belongs to the period.

Who should review grant accruals?

Finance should prepare or coordinate them, with program, procurement, HR, or partner staff confirming the underlying goods, services, or work completed.

What should happen when the invoice arrives?

Reverse or clear the accrual through the normal accounting process and reconcile the actual amount so the expense is not counted twice.

Conclusion

Accruals help your organization report grant costs in the period they were actually incurred rather than only when cash leaves the bank. The process should be evidence-based, reviewed, and reconciled when final invoices or payroll records arrive.